Angell on Big Pharma

Marcia Angell of Harvard Medical School and the author of The Truth About the Drug Companies talks with EconTalk host Russ Roberts about the impact of pharmaceutical companies on academic research, clinical trials and the political process. Angell argues that the large pharmaceutical companies produce little or no innovation and use their political power to exploit consumers and taxpayers.

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0:33

Intro. [Recording date: November 19, 2012.] Russ: [This Wednesday, November 28, 2012, Nassim Taleb will be launching his new book, Antifragile with a live event at the Powerhouse Arena in Brooklyn, NY. I'll be joining him there for a conversation about the book. EconTalk episode on Antifragile when it was in manuscript. Tickets $15 and go toward the purchase of the book.]

1:05

Russ: Marcia Angell, guest. You've written about the role of pharmaceutical companies in a lot of different areas. I want to start by referring to an article you wrote for the Boston Review a couple of years ago on how pharmaceutical companies have corrupted academic research and the clinical trial process. Explain what your concern was there. Guest: Most clinical trials of drugs are now sponsored by the companies that make the drugs. And these companies have gained great control over the way the clinical trials are designed, how the data are analyzed, where and whether the data will be published. And they introduce bias into the research results throughout this process. And yet, the researchers that do the studies, the drug companies don't have their own patients. So they have to go elsewhere to find patients. And they often go to medical schools and teaching hospitals and use faculty members there to do the trials. These researchers have become sort of hired hands. They follow the recipe that's handed to them by the company and they report the trials as the company tells them to. This is corrupting research and making the public--and doctors--think that prescription drugs are much better and safer than they really are. Russ: Now, part of this process of course comes from the regulatory structure that's set up. One of the strangest parts about that structure is the fact that the clinical trials are done by the companies no matter what, as is currently established. Right? The U.S. government, the Food and Drug Administration (FDA), doesn't have its own labs and its own tests. Guest: That's correct. Russ: So, the trial process is in the hands of the pharmaceutical companies, which is a little weird. But the weirder part is the part you are emphasizing now, which is that in the process of executing those trials they are paying and rewarding academic and medical researchers, which then affects--I think your concern and mine is that that affects their research elsewhere. So, talk about how, when you were Editor of the New England Journal of Medicine, why that was such a big concern to you. Guest: Well, I began to see. I was at the New England Journal of Medicine as an editor, and I became Editor in Chief my last year there. I was there from 1979 to 2000, when I stepped down from that position. And in those 21 years, I saw an enormous change in the relationship of academic medicine and clinical research to the drug companies. And I saw more and more bias introduced into the research. It's not so much that the drug companies were paying for the research. They had always done that. It was just the terms and conditions of the research itself. It used to be, up until the middle of the 1980s, that drug companies would simply give a grant to a medical school or teaching hospital for faculty members to do research on the company's product. But the company--there were no strings attached. They simply gave the money and stood back and hoped that the research made their drug look good. They did not presume to tell the researchers how to design their study, how to analyze it; or to tell them whether they would be permitted to publish the work. All of that changed as drug companies became richer and richer and began to shower their wealth on academic medicine. It was just too good to turn down, for the academic medical centers. So, the companies began to assert the right to design the studies. They actually said that they would keep the data; and for multi-center trials, sometimes they don't even allow researchers to see their own data. That is, all of their own data. They keep it secret. They would analyze the study. And of course it would always turn out that their drug looked good. And then they would tell the researcher whether they could publish the work or not. And one of the worst forms of bias is that the drug companies will not permit researchers to publish negative results. If the drug doesn't look good, it's not published. It's buried. Now the really shocking thing about that is that all of the clinical trials that are done, in order to get approval for a new drug to come on the market, must by law be submitted to the FDA. So the FDA receives all of the data, from all of the clinical trials. And a company will do many, many trials in order to get its drug on the market. And then the FDA will look through all of these trials, and if two are positive--that is, they show the drug is reasonably safe and effective--then they'll usually approve that drug; and the drug goes on the market. But there may be, for these two studies, there may be an additional 10 studies or 15 studies that are negative. The drug doesn't look good, or it doesn't look as safe as you would hope. But they will not release the negative trials. The FDA will not release the negative trials--because they say it's proprietary. They only release the trials that the company agrees to release. In lots of cases the negative results are hidden; the positive results are published; and the negative results are hidden within the agency that is supposed to be insuring the safety and effectiveness of drugs. So, that's pretty shocking.

7:47

Russ: Yeah. I agree with you. I just want to mention, and we'll come back to this later, that most economists who have written on the FDA are critical about their bias in the other direction--that the FDA is too cautious, that it's too expensive to approve new drugs, and that new drug approvals and innovation have slowed because of the costs and time it takes: particularly the time costs of getting a new drug approved. How do you reconcile those two views? Is one of them right? And they both right? Guest: Well, one of them is self-serving. And it's singing the song of the drug companies. But the facts are quite different. First of all the FDA is faster than any of the other regulatory agencies in other countries. It is the fastest, now. And it's the fastest because it's paid to be the fastest. That is, drug companies now, for each new drug that's reviewed, to get approval must pay a user fee--what's called a 'user fee'--to the FDA. And that user fee can only go, or the lion's share of it can only go to speeding up the approval of drugs. Those user fees now account for over half of the budget of the part of the FDA that approves new drugs. So, the FDA now has a financial incentive to approve as many drugs as it can, as quickly as possible, because these user fees are per drug review. So, the faster you turn them out, the better it is. And it's easier to approve a drug than to disapprove the drug. And also, one other factor in this is that the FDA uses some standing expert advisory committees to advise them about approval. And they consist of distinguished experts from around the country. These people are paid, often, by drug companies. That is, they are on the payroll in one way or another--they are consultants or they are on speakers' bureaus. So, there is extraordinary conflict of interest there as well. The question of innovation--you said that some people feel, economists feel, this slows up innovation: The drug companies do almost no innovation nowadays. Since the Bayh-Dole Act was enacted in 1980 they don't have to do any innovation. The Bayh-Dole Act says that publically funded laboratories in universities, medical schools, and at the National Institute of Health (NIH) itself--these are almost all NIH-funded--that the researchers who discover something can patent that. The institution can patent it, the university, the teaching hospital. And then license it exclusively to one of the big drug companies in return for royalties. So, you can see what happens there, the results of that. First of all, it puts the medical schools and teaching hospitals in the role of junior partner of Big Pharma--of the big drug companies. And so they can get royalties; and some of them get a lot of royalties. And the second effect is that the drug companies no longer have to do their own basic research. That's the creative part. That's the innovative part. They can license in or buy from startup companies, companies that are started up by the researchers in the universities, they can buy from them or license in from them the early discoveries. And then all they have to do is the late development. And that's the clinical trials. Now that is an expensive part of the process. But it is not an innovative part of the process. Russ: No, that's for sure. It's required by law. But let's just get a couple of facts on the table. I know these facts are sometimes elusive. Or ambiguous. Research and development budget of the pharmaceutical industry is, in 2009, was about $70 billion. That's a very large sum of money. Are you suggesting that they don't do anything--that that's mostly or all marketing? That they are not trying to discover new applications of the basic research? It seems to me basic research is an important part. Putting that research into a form that can make us healthier seems to be a nontrivial thing. You think they are--what are they doing with that money? Guest: I can tell you what they are doing with that money. If you look at the budgets of the major drug companies--just go to their annual reports, their Security and Exchange Commission (SEC) filings, you see that Research and Development (R&D) is really the smallest part of their budget. If you look at the big companies you can divide their budget into 4 big categories. One is R&D, one is marketing and administration; the other is profits, and the other is just the cost of making the pills and putting them in the bottles and distributing them. The smallest of those is R&D. The smallest is Research and Development. Profits usually are about the same. Marketing and Administration is more than twice as much. Russ: Right, but you are making the strong claim that they don't do any innovation; that they mainly free ride on the work of others. Guest: Yes. And what they do with their R&D--they are very secretive about these things. But what they do do, for sure, is sponsor the clinical trials of drugs, the innovative ones of which have been discovered in publically funded labs. And then taken in, either through licensing or through purchasing a small company, by the big companies. And then the late stage development, which is the clinical trials, which is the most expensive part of the process. But it's not innovative. Russ: No, for sure. Guest: It's no secret how to do a clinical trial. The other thing they do is to get top-selling drugs that usually were discovered in publically funded labs, many years ago, like Mevacor, which was the first of the statins to lower cholesterol and came on the market in 1987, or Prozac, which was the first of the Selective serotonin re-uptake inhibitor (SSRI) anti-depressants that came on the market the same year. What they do is get these top-selling drugs, twiddle a molecule enough to get a new patent and new exclusive marketing rights, and then market that. And you can now see that there are many statins to lower cholesterol. Probably the most successful was Lipitor. But now we are going on to Crestor and a bunch of others. But these were called 'me-too' drugs. It's a shower of drugs, all in the same class with no real difference that anyone can put their finger on. And that's what they do. They turn out one of these after the other.

16:00

Russ: So why does anyone pay the premium? Now, just to make it clear to our listeners, the original drug has a patent life of a certain length. It includes the clinical trial period. So the time that the drug is patented and you can charge what is effectively something close to what you might call a monopoly price is limited in years. And when that runs out, of course, profitability plunges. And I understand the incentive of pharmaceutical companies to try to maintain that through a tweak in, what you are suggesting, is mainly in name only, in terms of its effectiveness. Why would anybody pay a premium for that new drug when they the old one is so cheap? Guest: Because of marketing. I told you--they spend twice as much on marketing as they do on research. And particularly if you watch television in the evening, the news shows, it's marketing one drug after the other. And it not only markets the drugs--it markets the medical conditions they are used to treat. It convinces people who watch shows, that mainly older people watch, it convinces them that there is a brand new drug, a miracle drug for every ailment and discontent they can come up with. And so if they are shy, suddenly they have Social Anxiety Disorder and they need Paxil. If they ate too many Big Macs and they have indigestion, they need Nexium. And so the advertising of the medical condition is at least as big a factor in this as the marketing of the particular drug. And in fact research has shown that when you have a lot of drugs in one class, and most of these are designed to treat lifestyle diseases or conditions--that if you push one of those drugs, if you pushed, say, Zoloft, it would increase sales of the other SSRI anti-depressants in the same class. Because the market was so expandable that the market just grew bigger and they all benefited. Russ: Well, now I'm fortunate. I don't have any cholesterol problems and I don't take any antidepressants. But let's talk about someone who does. Someone who has got, lets say, both of these unfortunate situations. They've got high cholesterol and they've got issues with depression. They're going along, taking Lipitor and whatever was pre-Zoloft for this. And now they get this new drug that they create--what was it, Crestor? Guest: Mmmhmmm. Russ: And a new antidepressant drug. And the improvement is very small, maybe none. Although sometimes I suspect that there is probably some improvement--maybe fewer side effects. Guest: How would you know? That's the problem. Russ: Well, I wouldn't know. But somebody-- Guest: No one would know. Russ: But you'd think that the person who was paying for it would object to paying an enormous premium when there's a cheap alternative that was maybe almost as good. Guest: Well, you see, they believe there's an improvement. When the drug companies sponsor trials of their new drugs, and as I told you, they will design the study, and the studies are usually designed in such a way that the new drug is compared with a placebo--that is, with a sugar pill. It's not compared with whatever was already being used to treat that condition. It's not being compared with an older drug. And so when the drug is approved by the FDA all we know is that this drug is probably better than a sugar pill. We don't know whether it's better than the drug that's already being used. It may be better; it may be worse; it's more likely the same. At equivalent doses. That's another trick they play: When they do compare a new drug with an old drug, they often compare it with the old drug at too low a dose so that the new drug looks more powerful. But anyway, what happens is that all of these new me-too drugs in one class spill onto the market. There is no scientific way to know whether any is better than any of the others at equivalent doses. But they are marketed as though they were better. And so people and physicians--who get their information from some of the same places--the public come to genuinely believe that Crestor must be better than Lipitor, that the new drug must be better. And one example of how this worked was in a drug called Prilosec, to treat indigestion, essentially; to treat too much acid in your stomach. And Prilosec was the top selling drug in the United States for a while. Everybody was buying Prilosec. Expensive prescription drug. It was getting to the point where exclusive marketing rights were going to end. And so, what was the company going to do? Well, what they did was to get a form of Prilosec, essentially a form of Prilosec but the molecule was just different enough, name it Nexium, put Prilosec on the market as an over-the-counter drug, and then start to push the new purple pill, Nexium. And suddenly everybody who had been on Prilosec was now getting prescription Nexium, high cost prescription Nexium; and then they could buy Prilosec, the same drug, essentially over the counter. But they didn't do that because Nexium was promoted as if they were different. Which it wasn't. Russ: So, I'm only making the point that if that actually the case-- Guest: It is the case-- Russ: No, but if it were actually the case that I had to choose between Prilosec at an enormous discount to Nexium with my own dollars, I'd probably buy Prilosec over the counter; but when the comparison is Prilosec out of my own pocket versus Nexium paid for by somebody else, I may as well go with the one that's better. Guest: But neither is better. Russ: Well, let's say--well, but one is free to me or close and one is not. Guest: Yes. I think that's true. Russ: My only claim is that part of this thing that bothers you--which bothers me, too--is--although the profit motive of the pharmaceutical companies is part of the problem, it seems to me that the other part of the problem is we pay for much of our medical care with other people's dollars. And that allows the corruption of the process. So, for example, as you point out, if doctors are getting lots of goodies--conferences and swag and other things from the industry--they are going to be happy to prescribe those new drugs. And convince themselves, perhaps inappropriately, that they are actually better when they really aren't. Guest: Yes. That's true. And that is a problem in our health care system. As you must know. We have an irrational health care system and this pointed to one irrationality of it. Another thing is that the manufacturer of Nexium essentially bribed hospitals by stocking them with Nexium that was almost free, so that when patients were in the hospital they would be given Nexium, because it was cheap for them in the hospital. But then when they were discharged, they were discharged with a prescription for Nexium. And then they were on their own to get it. Either their insurance company would pay for it, as you say often happened, or else they would pay for it out of pocket. But you can see how a company was able to seed the hospitals with essentially free Nexium so that everybody would be discharged on that drug.

24:36

Russ: So, just to clean up a couple of loose ends before we move on. And I want to continue this discussion in a different area, but I want to just ask you a couple more things. You said that FDA approval is now the fastest. I used to read--and maybe these were isolated cases--that there would be drugs available in Europe long before they were available here because their approval was faster. Is that just not true anymore or were those isolated cases? Guest: It's not true any more. Yes, that used to be true but it's no longer true. It's faster here. Russ: And you think it's because of those fees? They incentivized? Guest: Oh, it's explicit. It's not just my opinion on this. The deal--this is called the Prescription Drug User Fee Act (PDUFA), which was first passed in 1992--and includes these user fees; and has to be renewed every 5 years. And the Act had as a part of it the speed with which the FDA would reach a decision about new drugs. And if it was considered an important new drug, then they had 6 months to review it. This is not very much. And if it was an ordinary drug, a me-too drug, then they had up to a year. But very, very fast. And that was explicit. Russ: And what had it been before? In terms of the length? Guest: Well, it varied. It varied a lot. It was never, in my judgment, outrageously long. But it was longer than a lot of European countries and Canada. That's no longer the case. Russ: So, I want to also go back to the point about the corruption of research centers, medical centers, and academics. You talked very poignantly--I don't know if 'poignant' is the right word--tragically, about a lead author in a New England Journal of Medicine piece who was receiving, I think it was $500,000 a year in consulting fees from the pharmaceutical industry. And that is disturbing. I think that corrupts. I am sure the doctor would explain: I'm a scientist, I'm a doctor, I would never let this affect me. But as an economist-- Guest: that's what they'd say. Russ: And I find that--the word I would use is 'implausible.' It's imaginable but it's implausible. So, the question is: How much do we want to blame universities and faculty? We have this problem in economics as well. It's a little bit subtler because there aren't as many direct payments that people can receive--from industry at least. They do get lots of, they have the opportunity, in economics, to have power, depending on some of the things they say. They can increase their chances of being involved with the Federal Reserve for example, which is very prestigious and leads to lots of other things. So, I think this is a problem in lots of areas. But what role do we--why is it that universities allow themselves to be essentially corrupted in this way? And I do think it is corrupting. Guest: It's good money. You say that the drug companies can't directly give money, but they do. Russ: I meant for economists. They can in medicine. It's much harder in economics. Guest: Oh, yeah. But here they just hand it out by the bushelfuls. There was one study that showed 94% of physicians in the United States get some money in some way from drug companies. Russ: Well, that could include a free pen. Guest: Meals. They get a free pen and they get a trip to Hawaii, too. Russ: The pen's not as good as the trip, yeah. Guest: It varies, the size of the gift. But yeah, gifts do generate a certain sense of reciprocity. Russ: No doubt. Guest: And the money just keeps flowing. Many doctors wouldn't have to pay for any meal at all if they didn't want to. Russ: I feel sorry for any of the 6% that didn't get anything and are listening now. Guys, get on the gravy train. Get out there. You've got opportunities. Guest: Well, bless them. Russ: Probably they have a clean conscience. Maybe they sleep better at night. Guest: I don't know. I think that the medical profession has come to believe a myth that's propagated by the industry, and the myth is this: That the industry somehow can both be an investor-owned business whose fiduciary responsibility is to enhance the value of the shareholder's stock, to make as big a profit as they possibly can; that they can simultaneously be that, be in the business of selling drugs, and at the same time be unbiased, neutral, research and education institutions. And doctors have swallowed that in this part of their professional lives even though they know better than to swallow such a fiction in any other part of their life. Russ: For sure. Guest: They wouldn't go to a Honda dealer and say: What's the best car to buy? And yet they will ask a drug company sales person what is the best drug to buy. And so, they tell themselves this because it's profitable. And it's now, even though these changes are relatively recent--I'm old enough to remember before all of this was true, before 1980; I'm old enough to remember when they actually had to do their own innovative research--this has so permeated the medical profession that now young doctors believe it's just a necessary part of medicine. And it's not.

30:55

Russ: Well, let me ask you an overall question. Later we'll get to some alternative ways we might think about having research lead to pharmaceuticals that improve our lives. But you are correct that in the post-1980 period, the profitability--I assume it's gone up; I know it's very high-- Guest: It's way up. Russ: So let's say, if we think of 1980 as sort of a turning point, or the Bayh-Dole Act as a turning point. What year was that? Guest: I think it was 1980. And then there were other related pieces of legislation. But also the criteria for getting a patent were relaxed considerably at the same time. The courts changed the definition of the requirement for a patent. It used to be that to get a patent on the drug it had to be of practical use; it had to be novel; it had to be non-obvious. It couldn't just be the next step in the process, but it had to be a leap. And it had to be practical. Which, before--I think the courts visited this in 1981--but before that, 'practical' meant that it had to have some use at the bedside. That was changed to mean that it had to have some use in further research. Russ: So, this has definitely led to greater profits. It's led to this opportunity for drug companies to coopt academic research in the ways you've described. I don't any of that either. So, we're on the same page there. We're going to disagree, I think, about how to make it better. But we agree that it's a bad thing. But if we step back and we ask an unanswerable question--but we can speculate--if we step back and say, okay, these changes have certainly led to some unattractive effects on academic research, on the medical profession; they've certainly led to greater profits for the drug companies and this backscratching relationship between these groups. But if you were a person with a heart condition or other medical problems in 1970 versus say, today, are you going to argue that the drugs available to me today are only a little bit better than they were then? Or are they dramatically better? Or are they the same? Guest: Now, I'm arguing about where they came from. Russ: Okay. Guest: For example, the treatment of AIDS now is just remarkable compared with what it was when AIDS first burst on the scene in the early 1980s. Russ: Of course. Guest: This was all NIH research. Not the companies that make and sell the drugs, but the NIH. That's what I'm arguing with you about. But I also make the case that there have been some real downsides of this in terms of health. It's not just the economic skewing or the bias for its own sake. If you look at Vioxx, for example, that probably caused on the order--tens of thousands of deaths that were completely unnecessary. Tens of thousands of heart attacks and strokes. And here's another example of the power of the drug companies. When it became clear to everyone--now, it had been clear to Merck, even before the drug was on the market--but when it became clear to everyone in 2004 and Merck pulled Vioxx off the market, a few months later the FDA got two of its standing committees and combined them. One was the data monitoring committee and the other was arthritis committee, I guess. Got the two of them together and had public hearings over 3 days: Should Vioxx be kept off the market? Should Celebrex, which is essentially a weaker Vioxx, come off the market? Should Bextra come off the market? Should the me-too drugs that were in the pipeline be allowed out? And so forth. And the drug companies, Merck and Pfizer, brought in a lot of people to stand up at these hearings and say that without their Vioxx or without their Celebrex their life would be miserable. The people who had had heart attacks of course were not brought in to testify. And after 3 days the committees voted that all of these could be on the market. There were 32 members of this combined committee. A few days later, the New York Times reported that of these 32 experts, 10 of them had financial ties to Merck or Pfizer, the makers of the COX-2 inhibitors, which is what these drugs are called. Ten of the 32 had financial conflicts of interest. And if those votes had been discounted, all of those drugs would be taken off the market except for Celebrex, which would be allowed to stay on with a black box warning. Russ: My preference would have been to keep them all on the market anyway and let people act like adults: Tell the risks and let them choose. There were many people who stockpiled those drugs because they were afraid they would lose their supply. And if our only standard is perfectly safe drugs, we are not going to have many drugs. So, I do think there's a tradeoff there. But your point about the corrupting influence is also true. That's totally wrong. Guest: It is totally wrong. And I would disagree with you. I mean, imagine saying, if you needed a head aortic stenosis [?] and you needed a new valve that caveat emptor--you'll choose your own valve. That would be silly. That's why you have an FDA. Russ: Why is that? Guest: Because you have no way of knowing. Russ: Well, that's true of everything in my life. What we have, we are all imperfectly informed. We all find lots of ways-- Guest: Well, you know, you like this shirt better than that shirt and it doesn't matter too much if your opinion is wrong. But here it does matter. Russ: I think I'd be a little more careful if there weren't an FDA. I think I'd try to find out a little bit more than just sort of hoping I'd trust the doctor--who is often wrong anyway. That happens. Guest: Yeah, yeah.

37:48

Russ: So, before we move on to alternatives, I want to talk about the piece you wrote in the New York Review of Books, which ties in to an episode we did here on EconTalk with Gary Greenberg about the definition of mental illness and the role of pharmaceuticals in dealing with mental illness versus talk therapy. Talk about what you argued in that article and how it ties in to what we've been talking about so far. Guest: Well, it ties in directly in the sense of all medical conditions. Mental health conditions are the most subject to being broadened. Because the boundary between wellness and mental condition is very blurry. So, if you can change those boundaries you get a lot more customers. Let me give you an example from another area that you mentioned earlier. You mentioned high cholesterol. One of the things that the drug companies have done through the experts that are on their payroll is to change the standard as to what constitutes high cholesterol. For a while it was anything over 280; then it was anything over 240; then it was over 200. And each time you drop the threshold you have increased the market by millions of Americans. And the same is true of high blood pressure. Each time you drop the standards--it used to be 140 over 90 was considered the cutoff for hypertension, and then they decided there was something called pre-hypertension, which is 120 over 80--each time you change the definitions you increase the market. You see this in mental illness. Each time you change the definition, each time you say there's such a thing as pre-schizophrenia and that should be treated, you have increased the market. And that's what I was writing about, the incentives of the drug companies and the psychiatrists, to increase the market and to use exclusively drug treatment. There is a lot of evidence that many of these treatments, while they have side effects, are not very effective in treating the conditions they are meant to treat. It's particularly true of the anti-depressants, that they are essentially placebos; since the FDA has all the negative studies and they are never published, the literature is very biased and it give people the impression that these drugs work. It gives them an unrealistic impression that they work. So, what you have is a combination of the conditions themselves multiplying, of more and more conditions being added to the Diagnostic Statistical Manual (DSM), which is the American Psychiatric Association's so-called bible, that has all of the diagnostic standards for all of the mental health conditions. The DSM, each edition--we're now about to have the DSM V--has more and more and more disorders in it. And many of these people who write the DSM have financial ties to the companies that make the psychiatric drugs. So that the more conditions you have, the better it is for the drug companies to make the drugs. Russ: Now, what kind of reaction did that article generate? I know you got a lot of push-back from psychiatrists. Guest: Yeah. Well, the American Psychiatric Association didn't like it, and the psychiatrists didn't like it. One of the things I pointed out was that psychiatry used to be talk therapy and a psychiatrist would have one patient every 50 minutes. And now they refer to themselves, psychiatrists, with the same training, refer to themselves as--what is it--psychpharmacologists. I think that's what they call it. Russ: They should call themselves pharmacists. That sounds like what they are really doing. Guest: What they do now is they use the DSM and they ask a series of questions, in a short time: Do you have any 5 of these 9 criteria for major depression? Oh, okay, you answered yes to 5 of the 9. Therefore I will give you this drug. Goodbye. If you want to talk to somebody, you can go and see a lesser person, a social worker or a psychologist and I'll move in the next person; and I can do three of these in an hour. And I'll make roughly twice as much by handing out prescriptions as I would have to talk to you and find out what your problem is. That's a big change. Russ: I assume the psychopharmacologists or whatever you've called them would object to that description of their role. Guest: Well, some of them don't. And in the NY Review of Books piece that I wrote on it--it was a 2-part article--I was reviewing some books on that. And one of them was by a psychiatrist who said exactly what I told you. And he said: I do this; I see three patients and hour; I make more money doing this. He was quite honest about it. Russ: I assume he also believes he's helping them, though. Guest: He does. Russ: And he could be right. Guest: But not as much as many other psychiatrists would want to say. And he's also very skeptical that there's any difference between one of these drugs and the other. So, a lot of psychiatrists will say: Yes, this is the way it is.

44:12

Russ: So, let's talk about some alternative policies that might change this. I assume there are people with different perspectives. Many of them are of course biased on the other side. Or in the pay of people who would be hurt by any possible changes. My solution to this is to make people pay with their own money. That would help, I think, make the world a better place and get rid of a lot of this. Guest: Make a lot of dead people. Russ: Well, I don't think so. I think the world would be a lot healthier. But obviously I could be wrong. But where would you push us, given these incentives that exist and the potential for corruption? What can we do to reduce it? Guest: Well, you won't agree, clearly. Russ: That's okay. Fire away. Guest: I feel that in life and death matters, matters that are very important to people's health, the government has a responsibility. That that's what a decent society does. And there are a few specific things I would argue for. One, I would stop PDUFA. I would get the FDA off of the industry's payroll. I think the public agency--I don't like the term 'user fees,' because it seems to me that the drug companies are not the users. The public is the users. And I think the FDA should be publically supported and supported well enough to do it strong. And members of advisory committees should have no conflicts of interest. Russ: And by the way, I totally agree with you on that, just like I also agree that the Board of the Federal Reserve of New York should not have people from the New York investment banks on it. Guest: Okay, good. Russ: These are all things that we've done--there's no 'we'--things that have happened due to the incentive to take advantage of the system the way it's currently constructed. Guest: Yes. Yes. Well, so far we agree. Russ: Carry on. Guest: The other thing is I would advocate that placebo-controlled trials not be accepted if this is a me-too drug. If there are already drugs to treat the condition on the market, that a clinical trial should compare the new drug with whatever is being used. Sometimes you might want three arms, particularly if you are not so certain any of the drugs on the market are very useful. You would, in the clinical trial be trying the new drug in a third of the population, an old drug--the best available drug--in a third, and a sugar pill in the other third. But I would not permit the use of placebo-controlled trials to continue. This is important because if this happened the ripple effects throughout the system would be enormous. You wouldn't be able to make a fortune simply by turning out me-too drugs. Because in most cases if you required that the new drug be compared with an old one, it wouldn't be any better. And so it would never get on the market. That would force the drug companies to do what they say they are already doing, which is to work on innovative drugs instead of turning out a whole host of me-too drugs. That would have ripple effects that may not be immediately apparent. I would want to break the connection between the drug companies and the research itself. That is, I think they should sponsor, they should pay for research on their own drugs. But it should go through an independent, perhaps another institute in the NIH, that would then put out requests to do the trials from the academic medical centers. So that the design of the studies and so forth would not be left to the drug companies. The medical schools and the physicians, I would want them off the payroll of the drug companies. And I think this is something that the medical schools should enforce. And they used to enforce it. The problem is that they too are now on the payroll of the drug companies. That is, through Bayh-Dole and directly. There has been a study that shows that, first of all, most medical schools are getting money directly from companies that are sponsoring research done by faculty within medical school. That the chairman in most departments in medical schools are getting personal funding and also getting departmental funding. All of that should be stopped. And you asked me earlier where I thought the blame lay for this. And I think it's, in a sense, you could say the drug companies are doing what drug companies do, and maybe they go overboard. Certainly almost every big drug company has paid huge fines for fraudulent marketing. But okay, you could say they are just trying to do what they do, which is to make a profit. The medical profession has no such excuse. They have no fiduciary responsibility to make a profit. They are tax exempt--the medical schools--and yet they are behaving like businesses. So, I think that the doctors, I think they are more to blame. And they really ought to get their house in order. Russ: I just want to mention for those who might be confused, who are listening and haven't heard the term before: Bayh-Dole--the Bayh of Bayh-Dole is b-a-y-h. It's referring to the Senator who company-sponsored the legislation that Marcia and I have been talking about a couple of times now. So that's the Bayh-Dole Act, which changed the property rights and relationship between some academic and research centers, and allowed universities to profit from their discoveries. And then sell those to drug companies. Guest: To royalties from drug companies.

51:03

Russ: I just want to mention one thing. When you say government has responsibility--it's a nice idea. The problem is: Who is responsible? When you say government has a responsibility--there's no such thing as a creation, a creature called The Government. It's the 535 members of Congress, the President, the agencies, and everybody else. Guest: Mmm hmmm, mmm hmmm. Which we elect. Russ: Which is a very tenuous connection. I agree with you-- Guest: But it's better than nothing. Russ: Well, it is. The question is: Is there a better alternative? So, while I agree with you that this argument that the drug companies should be excused because that's there job, to make profits, that's a horrible argument. And you hear it from the right all the time. The financial sector-- Guest: I didn't say it as an excuse. I was just making a comparison. Russ: Yeah. But you hear that sometimes. You hear: That's their job. Guest: Well, a couple of them have paid more than a billion dollars in both civil and criminal fines for fraudulent marketing. I don't want to excuse that at all. Russ: No, of course not. I'm talking about this nexus of payment and corruption implicit and explicit of the university system and the academic research and the clinical trials because it's in the interest of drug companies to do that because it lets them make money. And although that's certainly true, that's not a good excuse. Our system--the political system, and the regulations are what allow them to take advantage of us, and there's no reason that those should be there. As you point out. We could certainly reconstitute the bodies that assess research, and all those things. So, I think there's a lot of policies that could change that could limit the damage. Guest: You know, we have talked about clinical research. But there are other ways in which the drug companies influence not just research but medical education. Medical practice. They support probably most of the continuing medical education that doctors are required to receive in order to maintain their state licenses. This education comes out of the marketing budgets of drug companies and the influence what doctors in practice actually learn. So, it's not just research. Russ: Yeah, I agree. Guest: And insofar as--and I figure--they don't tell you how much they spend on physician education, bribery. They keep the particulars of their marketing budgets very close to the chest. But my back of the envelope calculations are that most of the marketing budget goes toward this, toward influencing what doctors believe. Toward continuing education, either explicitly said to be that or what amounts to medical education. And one of the things I often ask doctors when I talk to them is: Where do you think that money comes from? It's tens of billions of dollars, in just the top ten companies. Russ: It comes from you and me. Guest: What? Russ: It comes from you and me, from the payments they charge us through insurance companies, through Medicare. Guest: Exactly. And I would think doctors, who make a good living, relatively, ought to be ashamed of this. That all of their pizza and trips is tacked on to someone else's drug costs. Russ: I think they do better than pizza sometimes. Guest: A lot better. Russ: So, yeah, that's a problem. I think, as you point out, we didn't talk much about this, but the drug companies have a lot of political power. I have read--I don't know if it's true--that Obamacare bought the approval or at least the silence of the pharmaceutical companies by making sure that generic drugs were not an important part of that legislation. Is that true? Guest: Absolutely. It bought them in two ways. One was the Medicare Prescription Drug Benefit prohibits the government from bargaining for prices. Which means you would have a formulary and you would prefer generic drugs. The government does this with the Veteran's Administration (VA); it does it in the Defense Department. But the provision of the Medicare drug benefit said explicitly that they had to pay whatever the drug companies charged. That they could not bargain for lower prices. The VA gets probably the lowest prices of anyone in the country, because they threatened that if you don't give us low prices then we will go to generics. But Medicare was not allowed to do that. And so there has been a strong feeling that this should be stopped. That Medicare should not pay whatever they charge. And when Obama was campaigning, before the 2008 election, he said that that is something he would do. He would take that provision out. So, he backed down from that. And he also backed down from making it illegal to import drugs from Canada and Europe. Where the same brand name drugs can be bought for half price. There's a law against that now, and Obama campaigned on getting rid of that law, to create some competition. And he backed away from that. So, those two things were the major bribes that he gave to the drug companies, to get them aboard on the ACA. Russ: It does point to the fundamental problem we are talking about here, which is: Once you privilege certain groups, which is inevitably going to happen with something as large as government's role in the health care system, it's going to be very hard to keep the political power that results from that from getting larger, and then feeding back on itself in unhealthy ways. And certainly, I believe that what has happened to the financial sector has corrupted it. It's not a Republican problem or a Democrat problem. It's both parties are very friendly with the financial sector. And I suspect the same thing is true with the pharmaceuticals. I haven't looked at it as closely. Guest: Absolutely. It is both parties. Mainly the Republican, but both. And for many years the pharmaceutical industry in Washington. I don't know who is the largest now. I haven't checked that lately. But a very large-- Russ: They are up there, I'm sure. Guest: Yeah, they are up there. Russ: It does raise the question--this does sort of highlight what I would call the structural point you are making. A lot of people have argued, I have argued in the past, perhaps incorrectly, that if the whole world was a single-payer system--not the whole world per se, but if all individual nations were single-payer and could use their negotiating leverage to get cheaper prices for drugs--certainly the profits of the pharmaceutical industry would go down. Guest: Mmm hmmm. Russ: Your claim is that that would have a minimal impact on our health down the road, because they are not the drivers of innovation. Guest: Yeah. Minimum, negative impact. I would say no negative impact. Absolutely. Russ: It's an interesting question. I'm sure the industry disputes it. But as you point out, they are biased. I wonder who else does. I'll try to find out. You want to say something cheerful before we end? We've got a minute or two. It's been a pretty depressing hour. Guest: Well, it's a gorgeous day out. Thanksgiving is coming. You and I seem to be healthy and reasonably happy. So that sounds good to me.

Comments and Sharing

Wow. Russ, I love your podcasts, especially the clear presentation allowed to contrary guests. While I'm not surprised that Marcia Angell enjoys being interviewed, I can't believe her obvious blindness to counterfactual. Her critiques are superb, her recipies are on par with a great depression hobo dinner.
Does she not realize that her criticism of the current state of pharmaceutical research parallels what would be apriori expected by an informed econoomist, especially one with a Hayekian background? She carefully self selects motives to support her ideal state of angels governing the corrupt. She has always been like this, missing all opportunity to reason, going back to her NEJM days.
I can't wait to finish this podcast, it's worth a mint!

If every "me too" drug is the same as its competition why do some work for some people and others work better for other people? I have seen this in a variety of situations with myself and family members across a number of different types of drugs. Her zeal makes her seem like a jihadist against the companies.

A very interesting talk. I'm guessing the guest is not aware of Public Choice theory. Russ did push back and challenge her on the assumption that increased government involvement would supply her desired outcome. It's almost too predictable, unfortunately, that the solution to any problem is always to increase the size, scope, and power of the federal government, with the assumption that those participants in the political realm, unlike those in Big Pharma, are immune from perverse incentives.

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I was a bit shocked there wasn't more talk about how the FDA super expensive clinical trials serve to protect BIG PHARMA from competition creating barrier to entries for would be competitors. BIG PHARMA's competitive advantage is that it has the funds to do FDA clinical trials, unlike most possible startups. It seems freedom of choice with rapid spread of information would be much better for creating a competitive, innovative environment were harmful drugs are quickly eliminated.

Angell should have been more clear in regards to the "user fee" companies pay to the FDA. If the FDA gets paid whether a drug is approved or not then I don't understand how that increases the speed of approval. She was also unclear why its easier to approve a drug than to disapprove.

Its always astonishing how people with Angells view never seem to explain how the incentives that corrupted people outside of government wont corrupt people in government. As if an elected government official has never been corrupt.

Also if these drug companies are paying "royalties" to these universities for their research then are they not essentially funding the discovery of new, innovative drugs?

It was especially upsetting to hear how BIG PHARMA blocks competition from generic drug companies and foreign companies. The quickest and surest way to weaken and destroy a BIG INNEFICIENT company is to have them compete. It would be so refreshing to hear people on the left who are so suspicious of big companies to demand competition as the solution, instead of more government regulatory power which by its nature almost always ends up being co-opted by BIG COMPANIES and used for their benefit. So who is really "pro-big business"? Sounds to me like liberals are the perfect allies of big corporations.

I thought Russ could have doubled down on some of Angela's rebuttals. In response to his point regarding the noncompetitive payment mechanism (after 16:00, re: insurance and Medicare), she agrees, curtly, then follows up with a non-sequitur which itself wasn't altogether compelling but besides which had nothing to do with his argument. I don’t care what marketing tactic the maker of Nexium uses—it’s profitable precisely because indirect payment negates price sensitivity. But she missed the point.

There is a reason for taking control of experimental designs away from the M.D.s. Most of the have no experience or interest in experimental design and analysis, and tend to be rather naive about it. This includes such habits as not using randomization or control groups, posthoc exclusion of patients from analysis because "they didn't respond right" and similar practices.
I was medical faculty (Biostatistics) from 1977-1984, and had plenty of opportunity to see this, and watch the subsequent FDA reviews of the protocols/results.

Angell is so obviously bias in her views she can’t see anything outside her ideology. Whether she is correct on any point I don’t believe anything she says. Every word she says is dripping with illogical nonsense.

What's to stop some bright researcher, perhaps a Ph.D. candidate, or a post-doc, or just an ambitious, entrepreneurial person from conducting double-blind studies of two prescription drugs--the so-called "me too" drug and the cheap generic? (I'm sure one or two insurance companies would pay for such a study.)

The drugs are available for purchase, and people are often willing to volunteer for clinical trials to get free prescriptions. And then we would know if the "me too" drug is JUST THE SAME as the original. Then the insurers could cite this study and refuse to pay for the new drug.

Marketing isn't magic. It can't create new facts. if the EVIL DRUG COMPANIES have proprietary research that they are hiding, then perhaps someone else should do some research.

Yes, it's in the insurance company's interest not to pay. But it's in the Pharma company's interest to have them pay. Let them duke it out. Isn't that how knowledge progresses? Via competing interests seeking truth?

But to my original question, if the Pharma Co.s are so evil and suppressing the evidence, why is no one conducting the countervailing studies? Or could it be that the new drugs are safe and effective and there's nothing to be gained by trying to disprove the effectiveness of statins?

I think Russ should've pressed a little harder during the exchange transcribed at 30:55 when presenting the idea of an alternative to the FDA. Unfortunately, she sounds like a typical hyper-regulatory ideologue who doesn't recognize the public choice problems created by the very regulations that have been foisted upon the pharmaceutical industry. She's not all that different from the people who want to solve the financial crisis, which was caused by bad financial regulation, with MORE bad financial regulation.

I agree with JimV's earlier comment in that the current state of pharmaceutical research parallels what a Hayekian economist would expect. The answer to bad regulation is never more bad regulation.

I'm always stunned about how little weight non-economists give to competitive pressures. Russ asks a very reasonable question: "why can't people pick out their own heart values?" and gets some hand-wavy answer: "Oh, that's silly" and "when you pick your shirt, each one is about as good as every other and it doesn't make much difference."

The shirt fact is a *consequence* of competitive pressure, not some inherent feature of shirts. Similarly, it probably *doesn't* matter whether you buy a Toyota or a Hyundai, but that is because both companies are *competing* for customers. Any car company with a terrible safety record would be quickly driven out of the market.

Excellent podcast. I did not find it depressing and I did not think either party was too ideological.

First of all, I thought it was very encouraging to see this much passion and politeness combined in a very informative discussion of a controversial and important topic.

Secondly, even though there was not a lot of agreement on solutions, there was a fair amount of agreement on what the problem is and the fact that there is a lot of waste that represents potential savings available.

It seems to me that we ought to be able to be able to limit government subsidies to generics and new drugs that are clearly superior to generics. Then allow people to use their own money to buy other drugs if they want. Yes, some people will claim they really must have the new me-too drug. A few of them may even be right. Until DNA testing can tell us who is who this seems like a trade off worth making.

I do think that libertarians vastly overestimate the ability of the marketplace to drive out ineffective drugs. There is a thriving demand for homeopathic remedies, herbal remedies, vitamin therapies and any number of other alternative treatments that are no better than placebos. This market is mostly unregulated and seems to be growing, not shrinking.

@DougT , the problem is there is incentives. First there is little money for conducting this type of research but it is done. Second as much as we'd like to image physicians spending nights pouring over the latest research journals most get their information from the pharma sales reps. If the drug compnay conducts a trial that shows "brand drug A" has better efficacy and tolerability than "generic drug B", and there is another study which shows they are equivalent, the doctor will most likely see the former study because a rep from that company will come to their office and show it to them. There are no financial interests in promoting the results of the latter study. Additionally many conferences are sponsored by pharma companies with top prescribing doctors rewarded with high speaker fees to promote these drugs.

The only time private insurance companies come into it when there is a choice between taking a generic equivilent of a brand drug. Not between a brand drug and a different drug. 99% of the time a person isn't going to question a doctors prescription even if it costs them more because they do not know any better.

to muddy the waters even further it is interesting that some research has shown generic drugs are inferior to brand drugs (where the molecule is the same) due to different binders & fillers affecting absorption. The law allows for +/- 25% difference in the plasma levels of a generic drug vs the brand equivelent. This can be extremely problematic in psychiatric medications where research has shown people taking the generic form of a seizure drug had more breakthrough seizures than those taking the branded medication. So in these cases the insurance company is clearly acting against the patients best interest for monetary reasons.

@Ward writes:If every "me too" drug is the same as its competition why do some work for some people and others work better for other people?

Well first you have to identify how much of the effect is placebo and how much is real. This is where a study is required.

Also while it is true some drugs in the same class can be more effective for different patients it is also a cost/benefit calculation. How much better, how many people, and does it warrant the public and private cost

@marris Russ asks a very reasonable question: "why can't people pick out their own heart values?" and gets some hand-wavy answer: "Oh, that's silly" and "when you pick your shirt, each one is about as good as every other and it doesn't make much difference."

The shirt fact is a *consequence* of competitive pressure, not some inherent feature of shirts. Similarly, it probably *doesn't* matter whether you buy a Toyota or a Hyundai, but that is because both companies are *competing* for customers. Any car company with a terrible safety record would be quickly driven out of the market.

You misheard what she said, she said the consequence of the shirt decision is not the same as the heart valve decision. With cars, the government sets a basic standard of safety all car brands must adhere to, this is what makes the decision inconsequential, not the market pressure. As behavioral economics has pointed out people do not weigh decisions as rationally as needed to support the prescriptions of classical economists.

Also if these drug companies are paying royalties" to these universities for their research then are they not essentially funding the discovery of new, innovative drugs?

If I compose a song and ask a distributor to collect royalties for me, did this distributor finance my song writing? No, I have to do that by myself and only if I am successful I will get royalties. However, that is not really the point Ms. Angell was trying to make. Paying for successful research is easy. On the other hand, to create an environment in which successful research is created is rather hard and according to Angell done almost entirely by government institutions.
It is almost like saying: I bought that song, thus I can take credit for its creation (because I financed it)!

...incentives that corrupted people outside of government wont corrupt people in government.

Because she suggested a change that would also alter the incentives for the researchers. That could probably also be done entirely through regulation, but in some instances it is easier for the government to do things by itself instead of trying to impose a regulatory framework which creates the right incentives to companies, so that making money equals fulfilling the society's goals.

Since government bodies do most of the research anyway, it would be relatively easy to market those drugs, which potentially fulfill society's goal, instead of trying to incentivize the drug companies to do so.

What's to stop some bright researcher, perhaps a Ph.D. candidate, or a post-doc, or just an ambitious, entrepreneurial person from conducting double-blind studies of two prescription drugs--the so-called "me too" drug and the cheap generic? (I'm sure one or two insurance companies would pay for such a study.)

Obviously the university is not going to fund a very expensive study which is more likely to reduce it's money making capabilities by making a drug company angry. This leaves the insures, which have an incentive to fund those, but only if they are big enough. Ultimately all insurers would benefit, thus those studies will be underutilized unless they fund them together. It ultimately shows that we need a central institution (public or private) to order those studies.

It is basically the same problem as with the rating agencies. They company with the interest to get a positive result is paying for the studies, thus the results will be distorted. No surprise there...

As a Family Doc I had a number of patients on Vioxx who did not respond to other NSAIDs, antidepressants, acetaminophen or tramadol for pain control. Most of these patients went on opiods, morphine like drugs, for pain control after viox was taken off of the market. I suspect more individuals died as a result of the change to more dangerous medicine after the discontinuation of Vioxx than every died as a result of the use of Vioxx. The opiods would cause more falls and accidents, more interference with thinking and more sitting around. Here is a truth that Big Govco sympathizers do not understand "It is always bad business to kill your patient." It does not matter so much to bureaucrats if you are done in by one of their actions. Nobody makes any money off of a bad medicine.

One example of government action resulting in increased death involves the use of SSRIs in teenagers. It was found that thes drugs caused teens to talk about killing themselves more, it was also noted they showed more suicidal behavior, but interestingly had no increase in achieved suicide or suidie attempts. The FDA created a term for this "suicidality". A large black box warning was placed into the Physicians Desk Reference and in the Product Insert the FDA required for each of these prescriptions. Predictably, Family Docs and Pediatricians quit using these drugs in teens. Maybe we were using them more than we should have anyway, and our risk of a lawsuit would be increased if ever a teen did harm themselves after being placed on one of these meds. Accompaning the decline of use of these meds in teens, real suicide in teens increased 50% nationwide. The FDA will not reconsider the labelling of these products to remove the black box warnings. If a drug had caused thousands of suicides the FDA would ban it quickly. They can not be troubled to change their own policy just because physicians fear using drugs against the black box warnings. Hey, maybe it was something else that caused the increased suicide.

In defense of pharmaceutical representatives and their employers I would like to explain the $1 Billion fine suffered by Pfizer (I believe). This was for promotion of Neurontin, a drug developed for siezures which is now used for restless legs, neuropathic pain of various sorts and fibromyalgia. It was approved by the FDA for only siezures. Pfizer was fined for promoting their drug for all the other conditions it worked for. I do not ever recall a Rep telling me these things but I had heard speakers promote this at events. I was glad to have a medication that helped these patients. In effect, this company was fined for telling Doctors like me about their medication's good uses, The FDA doesn't want me learning anything they do not approve of. Of note, this medication is rarely used for seizures now, but is frequently employed for the uses the FDA fined Pfizer for promoting.

Another good podcast that demonstrates that, despite the exhortations of economists, we do not live in an economy. We live in a society, in communities. Economic rationalism does not rule ecology, biology, society and relationships.

Economics does not have all the answers. Corporate greed and deception is not simply the consequence of a failure to apply the 'correct' competitive pressure via 'free' markets. It remains illegitimate greed and deception committed on society. Just because drug companies CAN act this way does not make it ethically acceptable. Many correspondents here seem to excuse the conduct of these rapacious drug companies because the 'market conditions' allow them to act that way.

I understand that this program and blog is based in the US and is naturally US-based. But whether Americans are using the right drugs and paying the right prices is largely irrelevant when that issue is compared to the great oppression exerted by these drug companies in the developing world - crushing affordable alternatives and exerting illegitimate influence by enforcing draconian patents.

That the USA has legitimised the patenting of the mere discovery of a pre-existing phenomenon (eg gene research) has caused, and continues to cause the rest of the world a great deal of harm and ensures that US drug companies enjoy a world wide oligopoly that actively prevents solutions for suffering and disease in many countries. The US has done the same thing to developing world agriculture.

This is all the result of the religiosity of 'free' market corporate capitalism. Well done USA.

I reiterate, healthy community and society are always more important than an 'ideal' economic outcome. Sometimes this can be achieved by clever economic policy, but too often that is not teh case.

These drug companies should be punished for the damage caused to communities and societies, not congratulated for exploiting the flaws in the US medical system and of 'free' markets.

Interesting discussion, especially about the many layers of conflicts of interest.

However, I really do need to comment on Marsha Angell's continual shocking (or mendacious) ignorance about pharmaceutical research. Academic research often (but not always) identifies potential drug targets and sometimes produces proof of concept molecules. In reality, those discoveries are many man-years of effort away from an actual drug (and R&D failure rates reach 95% or higher). Dozens of pharmaceutical researchers spend years synthesizing hundreds or thousands of improved novel molecules, searching for the optimal combination of efficacy, specificity, absorption, distribution and metabolic properties. The required innovative high tech in vitro experiments and carefully designed animal studies can cost millions. Some of those test animals are complicated genetically engineered disease models. Identifying human responder populations (through biomarkers) and designing clinical trials can be extremely difficult. In basic research, a lab might use acoustic non-contact dispensing of nanoliter volumes of solutions in order to conduct experiments in 1536-well microtiter plates. Typical detection methodologies could include quantitative cellular imaging, singlet oxygen or fluorescence resonance energy transfer, man-made reporter cell lines, or even mass spectrometry. In clinical trials, novel dosing schemes or combination therapies are tested. There's even been some amazing innovations in biomechanical dosing devices such as inhalers. The idea that pharmaceutical research isn't innovative, and that it's "turn the crank" is just foolish.

As for so-called "me too" drugs, many are actually significantly different in their safety and efficacy profiles (as judged by published clinical data), and later ones are often quite superior to earlier versions (the long line of statins is a good example of this, actually). If companies don't try to improve on an existing drug, well, you won't get any improved drugs.

Finally, my impression is that med students and practicing physicians hold pharmaceutical sales reps in contempt. Slick marketing is not going to sway opinions. Financial conflicts of interest (personal and institutional), on the other hand, are potentially a serious problem. Particularly when you throw into the mix the constant pressure to publish and raise grant money. Most people are honest, but they do respond to incentives...

Which is why there have never been such things as snake oil salesmen, witch doctors, or people that sell water and call it medicine(homeopaths).

The comments seem to be missing the point of this podcast, which was the place where Russ and Marsha Angell agreed 100%(as far as I could tell):

Modern medical research is pseudo-science. You do 50 studies on a drug you're almost guaranteed to find at least one that shows an effect. That's a statistical fluke. It's why serious sciences like physics run experiments again. and again. and again, and again.

As Angell argued this is not the Pharmaceutical companies' fault. They are just doing their fiduciary duty. The doctors, however, should think really hard about whether or not they are not using anecdotes and rationalization to mask from themselves violations of their Oath.

I want to echo a programmer friend's opinion of homeopathy/medicinal herbs: "It's Darwin in action. The stupid will die while drinking radish juice to treat cancer, and the less stupid will benefit from cheaper chemo prices. Future generations will benefit."

The problem with that, of course, is that cancer sometimes goes in remission all by itself. Sadly, understanding that point seems to require a level of scientific literacy well above that of most people.

Listening to the podcast a line from the great movie "Ghost Busters" comes to mind when one fellow issues the command: "If someone asks you if you are a god then say YES!!!". The obvious truth is that none of us are gods and none of us are capable of creating rules for agents of force to manage such a hyper complex system as the healthcare system in the USA.

All of the solutions provided to this mess are simply changes to combat symptoms of the issues and not the core issue itself. Until someone attacks the core issue which is the penetration of government violence/bureaucracy in every imaginable part of the health care business then these problems will persist.

There are two ways to attack core issues in the pharmaceutical-academic-government complex and they are:
1. From Mises: "If patents are your problem then stop granting them." A big part of this whole mess is created by Intellectual Property and getting rid of it will create a more dynamic system.

2. Russ could have called the guest when she suggested getting rid of the FDA. Then let market created institutions certify the drugs and medical procedures.

@JohannesH
To use your analogy, would you even think about writing the song if there was no chance of making any money from it?

I would say that one major reason big Pharma pays these "royalties" to universities is because the research is partially subsidized by the tax payer (if its a public university). This idea that Pharma couldn't do its own research is absurd. They just dont because they can use government institutions to subsidize the research.

As for government taking over the pharma market. Who do you suggest pays for this take over? Do you believe that government could really efficiently do that? How is the post office doing as compared to its competitors?

Russ, you are a delicate master. Just enough pushing to keep things interesting, but not so much that the conversation goes off kilter. Another great podcast.

Here is a blog post from The Last Psych. A few posts with inside opinions about this topic and Marcia Angel.

A person who is not happy about the state of health care, pharma, mental etc...But does not agree with all of Marcia Angel's assertions and often ties things back to the larger scope of current culture.

Nice work, Russ. Your interview-technique was excellent. Marcia Angell is one smart guest. She had a lot of specific knowledge. You did a great job of facilitating her own exploration of her own ideas without imposing too many of your own.

I appreciate her point on the value of comparative studies and their relative absence among the pantheon of studies available to guide medical decision-making. There are not many comparative studies in existence. The ones we do have are extremely useful. They are usually funded through the National Institute of Health (NIH) or the US public health service corps or their equivalents in other countries. This observation has often led me to wonder if research might be a legitimate role of government or a legitimate role of the military.

Her discussion of the "user fee" pharmaceutical companies must pay to the FDA in order to speed up their processes sounds remarkably like a "bribe." We are becoming India.

Overall, her highly detailed discussion made me feel like I was reading another Ayn Rand novel. Curse that woman for being so prophetic. Private businesses taking control of the government agencies that maintain the private business's monopoly position is universal, predictable, and unavoidable.

Russ didn't get to talk about economics very much, so I will. The market assumptions for pharmaceuticals on the supply side are involuntary-informed-minimally competitive. The consumer side assumptions are voluntary-informed-minimally competitive. The only solution guaranteed to improve what everyone seems to agree are poor outcomes is to fix those assumptions on both sides. To that end, change the FDA to a literature-review and safety-certification body rather than a police body whose primary job--at present--is to restrict entry in to the market--ie reduce competition. Eliminate the FDA's power to act as a barrier to entry and competition improves and participation in the supply side of the market becomes voluntary. Common tort law over fraud would keep pharmaceutical companies reasonably cautious with their marketing claims. Common tort law for damages would keep pharmaceutical companies reasonably cautious over which drugs they sell to the market.

As a side note, I also want to share my sadness at the passing of Vioxx. Since the FDA banned its sale, we use far more Opiate medications. Opiates are addictive, sometimes deadly, and largely ineffective over long term use. Vioxx was not addictive and worked well over long periods of time. I echo Corey's sentiments above; I suspect banning Vioxx killed far more people than prescribing Vioxx ever did.

For all we think we know about how drugs work, there are important effects such as being told "... this is a powerful pain medication..." while being given a drug increases the effectiveness.

Having drugs beat the placebo effect is actually a fairly high hurdle. Also, apparently being told that a drug has side effects increases their likelihood.

Here's a case in point:

Japanese researchers tested 57 high school boys for their sensitivity to allergens. The boys filled out questionnaires about past experiences with plants, including lacquer trees, which can cause itchy rashes much as poison oak and poison ivy do. Boys who reported having severe reactions to the poisonous trees were blindfolded. Researchers brushed one arm with leaves from a lacquer tree but told the boys they were chestnut tree leaves. The scientists stroked the other arm with chestnut tree leaves but said the foliage came from a lacquer tree. Within minutes the arm the boys believed to have been exposed to the poisonous tree began to react, turning red and developing a bumpy, itchy rash. In most cases the arm that had contact with the actual poison did not react. (Morse 1999)

Perhaps the herbal / dietary supplement market provides something of a test case for deregulation. If so, experience noted in this article from Slate magazine - http://www.slate.com/articles/health_and_science/medical_examiner/2012/11/herbal_supplement_dangers_fda_does_not_regulate_supplements_and_they_can.html - tells us that a deregulated pharmaceutical market could quickly become the leading cause of death in America:

"In 1994, Congress passed the Dietary Supplement Health and Education Act, with heavy backing from the dietary supplements industry. By defining herbal supplements and botanicals as dietary supplements, DSHEA exempted them from the more rigorous standards used by the FDA in regulating food, drugs, and medical devices—essentially leaving it up to the industry to regulate itself. This single piece of legislation opened the floodgates to a rapid expansion in the sale of dietary supplements.

Between 1994 and 2008, the number of dietary supplement products on the market increased from 4,000 to 75,000. In the first 10 months of 2008, the FDA received nearly 600 reports of serious adverse events (including hospitalization, disability, and death) from these products and 350 reports of moderate or mild adverse events. However, the FDA believes that these reports are drastically underreported and estimates that the annual number of all adverse events is 50,000."

@ David
"To use your analogy, would you even think about writing the song if there was no chance of making any money from it?"
Are you suggesting that the economy is driven by demand? ;) Thanks to all the consumers out there, since they are the real job creators. :)

"This idea that Pharma couldn't do its own research is absurd. They just dont because they can use government institutions to subsidize the research."
That might be true, but if the government would not do a good job, they would do much more research by themselves. It also suggests, that there would be much less basic research if the government would not subsidize it.

"As for government taking over the pharma market. Who do you suggest pays for this take over? Do you believe that government could really efficiently do that? How is the post office doing as compared to its competitors?"
ultimately the consumer/taxpayer will pay for it (not much different from today).
They do not have to do everything by themselves, but if there are promising studies needed to market a drug, which does not give a financial incentive, they can just order these studies. (e.g. off label use of substances with expired patents or drugs for very rare conditions...)

The government is not the most efficient institution, but they are likely to rely on the same laboratories as the pharmaceutical companies. Just with the difference the pharmaceutical industry is interested in positive results, while the government is at least trying to get the correct results.

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So even if all 600 reports of serious adverse events you quoted resulted in death, herbal supplements would not make any list of common causes of death. I think it is fair to say that your concern that an unregulated prescription drug market "could quickly become the leading cause of death in America" is....unlikely.

Very interesting podcast and once again Russ did an amazing job. Props to the guest as well, as she was interesting, well informed, and had a lot of detail at her fingertips.

The good thing is that we all agree that something stinks. If I can indulge in a macabre metaphor, you might say that we all see the rotting corpse, we see the maggots feeding on it, the stench is awful, and we know something needs to be done. But what?

Some feel that moral suasion directed at the maggots might slow their feasting. Some that a fresher corpse should be put in place of the old corpse -- hmm, better smell! Still others argue that the corpse we have is fine... we just need to make it bigger, because that will make it more resistant to being eaten.

Here at EconTalk, many of us tend to think the first solution won't work -- a feast of calories is just too big a prize for maggots to ignore; the second solution is short-lived -- the maggots will find the new corpse, and figure out how to dine on it too; and the third solution just makes feasting even more attractive and more frenzied, as there is more to be gained and more to be lost should the feast be missed.

Can Tim Burton make this into a fun, introductory animation on public choice?

You mentioned a couple of times that the appropriate hurdle rate for new drugs should be higher than just "better than a sugar pill". Later, when Russ questioned the efficacy of government at delivering good outcomes, you said that government intervention is "better than nothing."

1. Is it so bad to have multiple drugs on the market that are merely "better than a sugar pill"? More competition in a product space that delivers a positive outcome seems like a good thing, no?

2. Is "better than nothing" the appropriate metric by which to judge government intervention?

Russ,
I was somewhat shocked by the guest attitude towards doctors being that she was an editor at NEJM. I am not sure whether she herself is a doctor.
I must say that in my 12 years of practicing medicine I have never met a doctor who takes seriously anything that drug reps have to say. In my training we were not allowed to speak with drug reps. To this day I do not talk to them.
Most docs I meet are good people trying to survive in an increasingly hostile atmosphere. They endure many years of training and sacrifice a lot during the prime period of their lives. I cannot speak for all doctors but my wife and I practice family medicine. We get a paid a very honest salary and one can look up online what the average salary of a family doctor is. I get really offended when I here the same old line from people who have no idea what doctors do....."doctors are rich and they all play golf." blah...blah
Between my wife and I we owe almost 1/2 a million dollars in combined student loans. We cut coupons and only buy things on sale. We are just staying afloat supporting 3 young kids.
Just because a select group of physicians are in line with the drug companies I dont think the speaker should cast this light on doctors as a whole.
It seems that doctors are really on the chopping block these days. Its no wonder that 50% of physicians report dissatisfaction and burn out.

@Nick You misheard what she said, she said the consequence of the shirt decision is not the same as the heart valve decision.

We're getting dangerously close to arguing by anecdote, rather than with data. :-) I agree that this is what she said. I'm saying she's wrong. I offered another consumer good (cars), which is closer to the heart value, where consumers *do* drive out bad (unsafe, unskilled, too expensive) competitors.

> With cars, the government sets a basic standard of safety all car brands must adhere to, this is what makes the decision inconsequential, not the market pressure. As behavioral economics has pointed out people do not weigh decisions as rationally as needed to support the prescriptions of classical economists.

The process I'm describing is: new features start out being offered on premium/luxury cars. The features get copied and implemented by luxury car competitors, and later, by middle tier ones.

At some point down the line, the government may make some particular feature mandatory [what was the last example of this? airbags?]. Even in this scenario, existing cars are grandfathered in, so it will be a while before the mandate helps poor people (who usually drive old, used cars).

For anyone not on the low end (those who buy new cars and presumably, would pick and choose their heart value), minimum standards are an afterthought. They look at things like anti-lock brakes (are these mandatory now?), all-wheel drive, total cost of ownership, etc. I claim that these buyers, who may not gather *all* the info they can, nonetheless gather a good deal of it: consumer reports, seeing what their friends drive, reading product reviews, etc.

I also claim that these folks, if they are asked to pick and pay out of pocket for a heart valve, will do *at least* what they research they'd do for a new car. Now it's possible that some behavioral economist has actually studied this and shown that this is not true: that we have some evolutionary blind spot when it comes to valve purchases. But has such a thing been shown?

I thought this was an excellent podcast because I learned stuff. Good job Russ, for letting the guest speak. She's wrong on the solution, but it would be pointless to argue with someone who knows little economics, let alone public choice theory. Thought Marris made a great point above--we take quality for granted for products in competitive markets like clothing. I know nothing about jet engines, but do I need a government agency to tell me whether American Airlines is safer than Southwest? And might jet engines be at least as complicated as a stent or heart valve? (It's not the FAA who makes flying safe.)

Public choice theory and government involvement at all levels explains why the pharmaceutical market is corrupt. It's depressing that Obamacare already has built-in anti-competitive measures. These will surely get worse as more lobbying resources get channeled to the fastest-growing money pot in the world, Washington, D.C.

@Seymour Self: Well, yes, I was exaggerating, our experience with unregulated herbal and dietary supplements does, however, support Angell's point that deregulating the pharmaceutical industry would lead, as I believe she put it, to "a lot of dead bodies."

This was a great podcast and she did shed some light on what goes on between big pharma and the FDA. I agree with Mr Roberts that people should be more aware of what they are buying and be more responsible then Marcia Angell seems willing to accept. Also some of her comments tapped a nerve for me and they don't correspond with my experience with other docs. As a practicing family physician for the past 12 years I have never met a doctor who takes drug reps seriously. Most of the time the docs are listening to the pitch and then forgeting about it. Like watching a commercial on TV in between the game. In my practice we do not have drug rep calls at all. In my training we were not allowed to speak with drug reps period. I think this is the trend with most of the younger generation of doctors due to how they were trained. Nevertheless even if we do encounter a rep we are not blind to what there motives are.
I also was discouraged to hear the typical sound bite..."doctors do well enough", like we are all driving mercedes and playing golf all the time. My wife and I are both family medicine physicians and make a humble salary. Together we owe almost half a million dollars in student loans (do to the ridiculous cost of medical education) and we cut coupons and buy stuff on sale. Financially we tread water supporting our 3 kids. If one wanted to make a fortune then medicine is not the answer. A few docs that ride the gravy train do not represent the majority of us who are here for a vocation. Unfortunately the vocation is in great peril as 50% of doctors report unhappiness and burnout. Many are leaving and fewer will be willing to sacrifice so much to be be manipulated and turned into a "provider". As universal health care comes about there will be less physicians to take care of patients.

Of course, those are overdoses, and not statistics on people who are using the drugs "correctly", but who still die.

It is important to realize there are always tradeoffs between cost, safety, and effectiveness no matter how the system is structured. I believe the FAA uses a cost figure of $7.8 million per life when evaluating whether or not to implement a new safety regulation. I'm sure the FDA has something similar.

Very interesting podcast. I agree with others that the guest brought a lot of good insights and that Russ was a good host. I was struck that Russ let her get away with suggesting if people paid for their own drugs that we'd have "a lot of dead people". He pushed back but far too gently for my taste. But it is a balancing act for Russ, I know, with provocative conversations like this.

As others have pointed out, I'm continually amazed that folks like Ms. Angell keeping suggesting that bad government interventions can be fixed with "better" interventions and her unwillingness to acknowledge the inherent public choice incentives that produce the outcomes we end up with.

Based on my 13 yr of experience in the pharmaceutical industry and 10 yr before that in university research, I found many of Ms Angell's opinions to be highly inaccurate at best.

First, her assertion that 'all' innovation comes from basic research is false. Although university researchers do identify targets that have to potential to treat certain diseases. These targets have to be validated by the drug companies. and often the original research can not be repeated, http://www.nature.com/nrd/journal/v10/n9/full/nrd3439-c1.html . But the big piece that Ms Angell failed to mention is the actual creation of a drug. Listening to her one would think that once the drug company get's their hands on the basic research it's off to the clinical trial races. But in fact drug companies often spend years creating a novel chemical entity or protein that has been screened through multiple models for both safety and efficacy (often in disease models different from the original research). One question I was hoping you would ask her is why most basic research is done at universities and not at private companies. Could it be that government funding has distorted the research process? Personally, I would like to see the end of all government sponsored research. The book to read is "The Economic Laws of Scientific Research," by Terence Kealey, http://www.amazon.com/Economic-Laws-Scientific-Research/dp/0312173067/ref=sr_1_1?s=books&ie=UTF8&qid=1354109891&sr=1-1&keywords=economic+laws+of+scientific+research .

Then there was her assertion that the drug companies impose their will on clinical researchers and the FDA, forcing them to accept their clinical trial designs and definitions of statistical significance. In my experience this is just not true. We alway solicited input on clinical trial designs from key opinion leaders for the disease(s) we intend to treat. After all, they are the experts, they see the patients every day, and we want our clinical trials to have the best chance to succeed. And the FDA also had input into the clinical design, especially what they will accept as valid end points and what they will accept as clinically significant.

What was perhaps most disturbing about Ms Angell's comments was her "cherry picking" examples to support her bias. So let's set use Nexium as an example and tar the whole industry as just developing unsafe "me too" drugs, while ignoring all the new and novel cancer treatments, and all the billions spent on failed attempts to find treatments for Alzheimers, stroke and fibrotic diseases. This was a serious injustice to the thousands of hard working individuals who are excited by the challenges of creating new drugs; drugs the will truly make a difference in peoples lives.

[tinyurls replaced with full urls. Please do not use shortened urls on EconTalk. Our readers like to see where they are going. --Econlib Ed.

The reason we treat the medical industry different, is that a bad choice can easily mean death. We as a society find that to be morally unacceptable.

Economist tends to look at the larger picture, where a few deaths now, can save many more later. Because morals play a large role in what we decide to do, it comes down to opinion. Let a few die with a bad or unlucky choice, or try and save a few and give up the possibility of learning how to save more.

A good example would be what the Nazis did to people with some of the medical tests. We typically agree that injecting people with things to see how they die is bad, but it does provide information that can be used to save lives.

This was really aggravating to listen to, and while I am pleased that Russ is kind enough to interview people that hold, shall we say, differently-economically-abled views, I would have liked him to hold her feet to the fire more. Can we have her back and have the listeners send in questions? My first question would be to ask her to defend the view that health care is "not a commodity." (I read that she said that on a PBS special, where apparently she passed herself as an expert on the entire health care "system" though she obviously is not.)

Instead, what we got was another condescending diatribe (same one she's been peddling and profiting from for many years, using her New England Journal title as "credentials") from Marcia Angell. Many of us in medicine have come to expect this from her. She has abused her (former) position with the New England Journal of Medicine to provide herself with a soapbox for her own religion. As one poster said, it is shocking how little she actually understands about how drug development works. Actually, it is shocking that she THINKS she knows how it works. As in every area of medicine, not knowing the limits of one's knowledge can be very dangerous. She has done a lot of harm in her career by essentially accusing all academics and physicians of being "on the take." This is having downstream "unintended consequences" that I have seen in practice. I have even seen cancer patients who have refused life-saving treatments out of a conviction that medicine is "corrupt." But here she is espousing that exact view, with minimal supporting data (and, for the "data" she did present, a complete lack of awareness of the root causes of the distortions that have led to the circumstances she is criticizing.) As one of the respondents to her review of psychiatry said, her main problem is "uncritical acceptance" of other people's views. So, exactly what she accuses physicians of (when she accuses them of believing everything drug companies say). So, I suppose she views herself as much smarter than every other physician.

In terms of the quality of her "data": very poor. She mainly used anecdotes, opinion, and unsupported assertions. I wish Russ had asked her, "And how much money have you made yourself from your position at Harvard Medical School, which you were given based on WHAT again?, and from your opinions and books about Big Pharma?" She has a notable conflict of interest, herself, in that she is highly invested in making her (unsupported) case. It helps her sell books and get speaking gigs (and by the way, Grand Rounds talks pay well; shouldn't she give away this money since it's not a "commodity"?).

To answer one poster's comment, I highly doubt she is practicing medicine, or has practiced for a long time. She shows how out of touch she is with modern medicine in many of her comments (and how disparagingly she views real practicing doctors). She is the classic liberal elitist and would fit very well in any Thomas Sowell essay.

Finally, as a practicing psychiatrist, I can only tell you, based on my firsthand experience, how biased, inaccurate and uninformed her opinions are about psychiatry and psychiatric drugs. She is viewed with contempt by psychiatrists for her uninformed (and again, anecdotal) attacks on psychiatry. Depression is not a "lifestyle" disease. That was highly inaccurate and, frankly, offensive. I would like to ask her about her experience treating depression; I doubt she has any. Second, SSRI's (and antidepressants generally; nor other psychiatric drugs) should not be dismissed as "me too" drugs. They have similar (though not identical) mechanisms of action (and actually we don't really understand WHY they work, which is true for many other classes of medications), but (as one poster said), they do not all work for everyone, which is why we often have to switch medications or augment with other medications. They also have different side effect profiles, as well as important differences in the type and seriousness of their drug-drug interactions (which is why psychopharmacology is actually quite complicated--much more so than she acknowledges -- likely because she has no idea.) So, again, she simply demonstrated her ignorance by venturing into this area. These drugs are lifesavers--and, as another poster pointed out, the FDA's black box warnings can cause much more harm than good, as in the case of teen suicide.

See the Responses to her book reviews from people who actually practice psychiatry and conduct psychiatric research:

Russ was incorrect about Big Pharma Pens and boondoggles. The new PhRMA guidelines have done away with much of this at least for us ordinary doctors ("acedemic" docs still take lavish trips and make good cash as "consultants"). Big Pharma pens are antiques.

I however, just got another Hospice Pen and some beautiful rainbow colored post-its ("Rainbow Hospice"). It seems that the government has no problem with Hospice programs promoting their services with pens, lunches, etc.

I guess referals to hospice are "in" and drug therapy is "out" these days.

"Me-too" products exist in every industry. As soon as one company creates an innovative product that attracts customers and profits, other companies attempt to create similar products that are either "better" or targeted at a different market segment. This raises the bar for all companies, might lower prices, and improves product quality. While the price mechanism doesn't work well with drugs, the variety of related products gives people choices. If one doesn't work, or if the side effects are intolerable, they can try another. In addition, people can easily determine whether the drug is effective. Isn't it better to have multiple options than only one?

The comparison to the heart value is false. You get only one chance to try the heart value and the risk is very high if it doesn't work. That's not the case with drugs.

JimV: "great depression hobo dinner"
Haha good one sir, going to work that into my dictionary.

As others commented, very biased guest this week. She actually brought up some good criticisms of the current FDA/govt run healthcare paradigm. Ironically, all the problems she mentioned are caused by govt, and could be solved by LESS govt, not more, which she advocates.

Can we use this podcast as a case study on the poor reasoning skills and lack of critical thinking ability of the average HMS faculty? a.k.a. the kind of people who are about to gain even more wide-ranging control over nationwide healthcare policy? As always, the mastermind is quick to point out the fallibility of their subjects, but never willing to acknowledge their own. Far better for each of us to have the freedom to make our own small mistakes than relying on a handful of Harvard educated PhDs to make mistakes that effect all of us.

Also, the older I get the more this suspicion is creeping into my work, "do these drugs really do anything or have we really been oversold??" Obviously many drugs are wonderful for survival, but I do wonder. Particularly with drugs like pain medications for non-cancer (I'm a palliative care doc) and antidepressants/anti-anxiety meds. I just wonder. . . does anyone else feel that way?

Russ, can I suggest an example that may be illustrative in future conversations?

In 2010, 36,000 people died of auto accidents. This is about 1.5% of annual American deaths.

Driving is risky. Which car we buy is a life/death decision (as opposed to the shirt example that Angell gave, where making a mistake is no big deal).

By and large, this challenge is solved by consumers. Information is made easily digestible through consumer reports, etc. Competitive pressures ensure that quality goods are supplied at low prices.

I can see why Angell is EXTREMELY skeptical of patients making informed choices between health products. We currently do not have a patient version of "consumer reports". This is not to say that, if the incentives were not changed, such consumer reports would not emerge to help lower the information costs for patients making life/death decisions.

When viewing this situation, or any other, we have a decision to act or not act, and then an outcome that is either positive or negative. Some might focus attention on cases where we take action and we have a positive outcome (I have a headache, I take an aspirin, I get better). Of course, we have a total of 4 cases to consider:

1) Do take a drug, get better
2) Don't take a drug, get better anyway
3) Don't take a drug, stay sick, get worse or die
4) Do take a drug, get no benefit, or have an adverse effect

Overlaying those 4 quadrants, we have the placebo effect, the nocebo effect, and genetic differences among people. (and probably other complicating factors)

Much like central planners want to design the perfect economy or intervene in some way that pushes the world into the first quadrant. They first ignore the case where taking no action has a positive outcome, and then point to the other cases and say "look, if only you had followed my prescription, this wouldn't have happened."

Matt Ridley's book, The Rational Optimist has a great section on all the future doom that was forecast that never occurred. Essentially, this is just fear of the future compounded with a desire to control. A prescription of "I Pencil" is recommended just to remind us of how little we know, but yet somehow things always get better.

Russ, regarding Raja's idea that Marcia seems predisposed to shortcutting reason providing a case study. She demonstrates a wanton blindness to following a logical discourse. Could it be that she can only hold her prescriptions by avoiding critical examination? I'm always interested how someone who opposes what I believe came to their positions, and examination is far more enlightening than the closing of mind that she displays; very arrogant. She seems not one bit curious to her opposition.
I like that Thomas Sowell indicated the essence of economics is asking "And then what?" We must always be asking the next question.
This is very commonly avoided by some of your more antagonistic guests, like the vilific character who is Stiglitz. There really is a difference between those like Mike Munger on the one hand, and something detectable as almost deceptive like Stiglitz. I don't want to seem harsh, I'm genuinely curious.
Were I on the side of Marcia, I would rant at her sidestepping, maybe wishing she would grab red meat and really lay down what logically follows her premise. We're all academic here, where she ought have no fear that her positions will be disregarded. Certainly at EconTalk, the thrust is one of teasing out the honest nuanced substance of some thinkers who may not have the best speaking skills, but results are generous and beneficial all round. How can it be that Munger comfortably follows a clear road laid out by his beliefs and their consequences, where Marcia sidesteps every opportunity to clarify and explore the same?
Confirmation bias on our [my] part?
It's interesting insofar as I come across many people who hold that "politics" is a genetic predisposition that precludes our common language.
Back to the point though, are there sides in an argument who preserve their integrity by just not addressing the real consequences of their proposals? Marcia answers that for me.

1. Marcia Angell has discovered Regulatory Capture, something that listeners to Econtalk know well and dislike as much as she does.

2. Angell describes the way that universities and medical schools do drug studies for drug companies. They are doing contract work, something which universities have been doing for decades – Columbia and UC Berkeley were involved in development of the atomic bomb. It’s not right or wrong but is, in this case, a poor use of expensive and highly qualified resources. One would hope (hope springs eternal) that the profits accruing to the schools from this work are reducing tuitions.

3. I wonder why patents on cell phone technology, software, and soybeans exist yet we have growing and competitive markets for these products.

Though the United States urgently needs new treatments for common illnesses such as heart disease, stroke, and diabetes, the nation’s system for drug approval discourages innovation and investment, especially for our most pressing public health challenges. In this paper, we find that the main culprit is the high cost of Phase III clinical trials, which are required for FDA approval of most drugs. We examined drug development in four major public health areas and discovered that for any given drug on the market, typically 90 percent or more of that drug’s development costs are incurred in Phase III trials. These costs have skyrocketed in recent years, exacerbating an already serious problem.
http://www.manhattan-institute.org/html/fda_05.htm

Russ,
Many thanks for your patient good cheer in presenting the needed balance to the ever-tedious and overly moralistic "These things are too important to be left to mere mortals" argument that is always a prelude to a plea for more "expert" guidance (read: bureaucracy) with the inevitable mirror-image corruption of regulatory capture.

The result of that double shuffle is that the poor consumer ends up paying twice instead of once: Once for the same drugs at the same high (or higher) price (either because it's "government certified" or because of reduced supply of all medicine) and again as a taxpayer to fund the expert bureaucracy who are now the ones receiving payments from the drug companies instead of universities and doctors.

The idea that drug companies should pay for their own research, that individuals (with family and friends) really can look out for their own best interests, and that - on balance - things will be as good (or better) and consume fewer real goods in the process is just lost on some.

As an item of interest - the Bayh of Bayh-Dole is Birch Bayh (D, Indiana) who was a US Senator from 1963-1981. More to the point is that Eli Lilly & Co (Big Pharma) is headquartered in Indianapolis.

In regard to Bayh-Dole, [formally and somewhat revealingly: "University and Small Business Patent Procedures Act of 1980"]: It is interesting that in drafting Bayh-Dole, Bayh must have contemplated as he argued in an amicus brief before the Supreme Court in Stanford v Roche (2011, http://www.supremecourt.gov/opinions/10pdf/09-1159.pdf) that practical results of research performed at a federally funded contractor-university are the property of the contractor-university and not the individual researcher.

To boil it down: Stanford sued Roche for infringement. Stanford asserted that it rightfully assigned exclusive property rights in a process developed by one of its researchers acquired through "adjustments" in the patent law courtesy of Bayh-Dole back to NIH and the US Federal Govt (read: the invisible taxpayers) which provided funding. However, as a condition of being given access to the privately developed initial (later Nobel-winning) research at the small company later purchased by Roche, the researcher had already assigned his right.

In any event, the Supreme Court disagreed with Bayh and Stanford 7-2 (Breyer, Ginsburg dissenting). At best Bahy-Dole is ambiguous. The inventor, individual researcher, retained his rights which he properly assigned to the Roche-purchased company. Roche prevailed.

Not being a lawyer, I would be interested to hear Prof. Richard Epstein's take on this and just about anything else. No, anything else without qualification.

The moral philosopher wishes to know if Sen. Bayh and his "good friend Senator Dole (R) from the great State of Kansas," dreamed this up on their own or received it in trance. Perhaps a random constituent suggested it as a first step in making the world a better place.

The same philosopher perhaps too fearlessly inquires if St. Marcia of Our Lady of Immaculate Indignation resides in a garret and if not with whom she dines and shares her time. One is rather more inclined to agree with the premise that mixed motives is the usual case so that individual choice and voluntary arrangements reinforced by stable institutions are the better model for general prosperity and individual welfare.

This was astonishing - Angell had almost nothing good to say about the pharmaceutical industry - that EVERYTHING good that we have today is because of innovative research done at the NIH (and other places funded by NIH).

No one will dispute the role of fundamental, innovative research funded by "Government" - but to dismiss the role of taking a basic science idea into a marketable drug as close to trivial is plain stupid and very condescending to the drug companies and the many people who work at translating ideas into products.

She had nothing - NOTHING good to say about the many, many drugs we have today on the market - except to keep repeating "me too drugs" and "they make billions" and "physicians/hospitals are the problem" and so on.

I am now beginning to wonder her role at the NEJM - how she may have ruthlessly rejected manuscripts NOT on the basis of the science/data - but as to who the authors were and whether she thought it was "appropriate"

Russ pushed back some - but did not draw the lines clearly enough to point her as someone determined to stop almost all private sector innovation/development - and leave it all to GOVERNMENT.

Towards the end, as Russ agreed that the problems are not limited to one party, she could not resist but blaming the "Republicans more" - She is clearly a partisan with her own agenda and does not care for free markets or free people - but imagines that GOVERNMENT (BIG BROTHER) can do it all.

One reductio ad absurdum conclusion from Angell's comments is that "engineering" is trivial - since after all, it simply builds what the scientist discovers in the laboratory.

A key problem today in the pharmaceutical industry is the lack of good understanding of how to "scale up" the production of biological macromolecules, including proteins. NIH researchers indeed do an outstanding job of identifying candidate proteins (or other molecules) that may be promising for treating specific diseases. Forget the expense of the Clinical Trials (which is HUGE) - unless there is a Big Pharma willing to risk putting billions into producting that drug/molecules, only a few elites will enjoy the benenefits of that drug. There is a bottleneck today - in the production of biological drugs - and if the GOVERNMENT were to make it even more difficult for these companies to try and make a profit out of these drugs, the situation will get worse.

It was indeed depressing to listen to Angell - We have people like this who are adamantly hostile to private, big pharma and imagine that everything we will ever need can be supplied by GOVERNMENT.

I honestly think the biggest problem in discussions like this is over confidence in ideology, and a knee-jerk desire to denounce entirely anyone in disagreement with them.

I think this can be seen greatly in the fact that Angell actually promoted multiple ideas that I would THINK EconTalk listeners would largely be in favor of.

She lamented Obama's deal to deny people the ability to purchase cheaper drugs available outside the United States. She lamented the fact that Obama would not allow the government to bargain down the price of drugs it purchased... Now I know most here would prefer the gov't wasn't involved in purchasing drugs at all, but if they do (with taxpayer money) you should surely be in favor of them trying to get the best price they can.

And although I doubt most (including me I might add) would not likely be in favor of her solution to the patent issue, she did bring up concerns regarding patents that I would think many here would be sympathetic to.

I must say I am also tired of the false dichotomy that there are just two kinds of government, "big" and "small," and that aside from these distinctions all governments are equal. This is just not true. There are small governments that are incredibly poorly run and full of corruption and big governments that are decently run (if far from perfect). Not everything can be reduced to small = good.

I ironically find that I feel libertarian minded people often can seem at odds with their own goals. "Privatizing" government services and property can often mean the government giving sweat deals funded by taxpayers to "well connected" businesses. Regulations in addition can (even if you don't find it ideal) be at least a second best solution to a problem if done well.

If governments truly are hopelessly corrupt and inefficient, than aside from a revolutionary uprising, we should just give up because they can't be fixed right?

I'm suprised you think you could choose the right information to make your own decision "as an adult" to be able to "make an adult decision" to use the right drug or heart valve or whatever medical decision you might need to make. First, you relegate anyone needing government oversight of business enlightened self-interest to sell high and buy low as being childish. Not an adult. Libertarian? Okay, but have you looked on the internet lately? There's plenty of sites which offer crap advice based on testimonials, or post supposedly autonomous advice but are paid to have fake blogs which praise a product. It's called marketing, Russ. TV is only a beginning. But you can see through all that perfectly, having a massive intellect. Those who don't can perish, and reduce the surplus population. Are there no prisons? Are there no workhouses? Rather an Ebenezer black and white world you inhabit, Russ. We shouldn't even try to regulate?
http://www.econtalk.org/archives/2012/07/taubes_on_why_w.html
John Kelly, MD, MPH

I appreciate the fine line between an interview and an argument. Russ did a good job. What I would like to see is a point/counter point review of this pod cast. I believe that Marsha's use of questionable statements, presumed fact, plus her ideological position made it difficult for the average listener such as myself to believe or not. Some of what she said rang true but her rationale seemed contrived. I think there is a huge problem and some of what she said is part of it but it is too difficult for me determine what is and isn't correct. Any help would be appreciated.

Yes, Russ, if individual adults are permitted to make medical device choices in the same way that they make choices over 70 mph 3 ton computerized carriers of highly explosive chemicals that routinely pass within 4 feet of each other; or pharmaceutical choices in the same way they choose drain cleaner, paint strippers, pesticides, or meals from complete strangers; or behavioral choices in the same way they choose to enlist in armies, raise children, or go BASE jumping; then "a lot of deaths" is the only possible result worth noting.

Because you see, just because people commonly choose to seek specialist advice and practitioners in all of those things is absolutely NO reason to believe any of them would consult a trained physician for their health care needs if they didn't have to.

And of course, someone who would not choose to supply or use the services of this particular genius saint's glorious profession deserves to have police action taken against him.

Yes, this is a good example of why I cannot relate to most people in the medical profession. Their biases are as profound as they are blind, and are only dwarfed by their paternalistic hubris and contempt for lesser mortals.

Jeez, where to start. Well, I've never listened to this podcast before, so I don't know how it usually goes, but Russ let MANY EGREGIOUS distortions and outright lies go unchallenged. I'm not terribly surprised, someone who has little or no training as a scientist and no direct knowledge of drug discovery and development can't be expected to know it all already. And Angell is very good with her talking points, as absurd as they are. To a lay-person they sound plausible. To an expert, her arguments are obscene.

Let's take the general assertion that pharmaceutical companies don't do any basic research. Ok, well I'd like to know what it is exactly that I do all day. I mean, I spend my days in the lab, making molecules that humankind has never before described and never known. Let me repeat that: never in the history of mankind have the molecules that I invent and synthesize ever been known. And another thing, the disease state that I'm trying to cure has no effective therapy; I know this because both my aunt and a close family friend suffer from it.

I subject these molecules to a battery of tests and try to understand how structural modification of these molecules affects the various pharmacological properties. I synthesize these data into various hypotheses, which I then test by synthesizing the next set of molecules, which, again, humankind has never before known. My hope is that one day, years from now, through talent and luck, one of my compounds will go on to help millions of people who suffer from this debilitating disease.

Oh, and I'm one of 40 scientists on my floor, all of us performing various components of this process, in an 11-story building containing almost exclusively scientists developing cell models, animal models, enzymatic assays, and a host of other tools that the world has never before known. In Marcia Angell's world, we do not exist. Here's another eye-opener for you, Dr. Angell: my building is just one - of dozens - DOZENS - in the greater Boston area alone, full of scientists trying to positively affect human health, just like me. And yes, we all work for pharmaceutical companies.

Here's one more tidbit for you, Dr. Angell. I work with a whole lot of really, really smart people. You know, the people who ruined the curve for you in your organic chemistry class, graduated from top universities with a 4.0, and then went on to receive Ph.D.s producing seminal research for eventual Nobel Prize winners. We've seen research from both the academic and industrial sides, and none of us have figured out The Recipe for producing the next Blockbuster without a lot of sweat, tears, and money. But you seem to think this process is trivial and cheap, which makes me think you know something I don't. I beg you, enlighten me. My mother-in-law died of incurable cancer, as did my grandfather and aunt. My grandmother suffered horribly with Alzheimer's, my other grandmother continues to try whatever she can, with little success, to alleviate the arthritis in her hands. Each of these disease areas are ones that I and my colleagues spend our careers fighting. Please. Tell me what we're missing.

Being both an employee of a pharmaceutical company and the beneficiary of health benefits from a number of medications, I found most of what Ms. Angell had to say to be misleading at best. Her insistence that "me too" drugs are simply a way to increase pharmaceutical revenue was most disturbing. She implies that all people are the same and that minor tweaks to a molecule can offer no improvement for at least a subset of the population. She even went so far as to state that people currently benefiting from medication only believe there to be a improvement in their well-being as though she had some insight into the health of the populace elusive to the rest of us.

While Ms. Angell might have had some valid points concerning industry incentives, they were obscured by her blatant bias against the industry in general.

There's lots of great critique of this podcast already, but I'll add one specific point.

It's ironic that the guest chose the statin class as her example of me-too drugs, as Crestor (rosuvastatin) has the desirable property of not having Cytochrome P450 metabolism interactions. This allows it to be given with a large number of drugs that can't be given with e.g. Lipitor (atorvastatin) due to the elevated risk of liver damage that results.

Take out the ideology and assume she is mostly right. Combine this podcast with the other recent one about medical insurance by Cochrane.

Surely the market is crying out for a hospital that uses drugs that have lost their exclusivity rights and so treats patients at a fraction of the cost. Patients get to 'choose' to use this hospital for their treatments in the knowledge that they are using perfectly valid but not cutting edge medicine. You now have your low cost care as per Cochranes' low cost airlines example. The institute could then offer insurance at a massively reduced rate as long as users agree to be treated by the hospital. This would I believe meet many of the issues raised in both podcasts.

As I am not from the US please could those of you with more experience tell me why this would not work.

FYI

In the UK is a bloke called Ben Goldacre. He spends most of his time campaigning on issues like this. He is also a trained MD and as such is one of the people that Angell blames for the problem. He is running all sorts of programs at national level that hope to answer many of the comments above.

@MarkOS-
Your idea is based on the premise that drugs make up the majority of health care expenditures. This is laughably off base.

In the US in 2011, drugs represented 12% of total health care expenditures. Of that 12%, roughly 1/3 of that amount was spent on generics. Therefore, prescription drugs accounted for 8% of healthcare expenditures in the US.

Furthermore, in a hospital setting, prescription drugs make up an even smaller fraction of expenditures - the vast majority of expenditures in a hospital setting are on medical imaging equipment, operating costs, salaries, insurance, etc. Therefore, your "massively reduced rates" would amount to perhaps 5%, as a generous estimate. And that's an upper limit, assuming ALL spending on branded drugs was completely eliminated. But hey, maybe you're comfortable telling your mom that she can only use drugs invented 20 years or more ago to treat her cancer because you want to save 5% of your medical bill. That's your prerogative.

@ba
Thanks for the stats. I was not aware that drugs were of such minor import in medical costs. I would however like to forward a couple of clarifications/rebuttals of your points.

My premise is based on a new model of hospital as suggested in Cochranes podcast not on the existing ones. I recognise that as such it doesn't exist and therefore no figures are available, however it is a thought experiment.

I did a quick IntSearch and came up with a figure of national health insurance costing 2.6 tn in 2009. I assume its gone up. If I am more conservative than you and say drugs only make up 2.5% of costs, it still comes to around 65m that's got to pay for a few scanners each year thus bringing their costs down etc etc.

Despite the fact that chatting about someone's mum is fighting talk where I come from I would say this. Angell points out that new drugs are tested against placebo or if against competitors, then at inappropriate doses. If the choice is between a drug with a twenty year history of effectiveness with known side effects versus something new that has only recently passed the above tests then I would suggest reputation might be a safer way to go than betting on the price dictating the effectiveness of a treatment.

From your previous post it is clear that you are passionate about the very important work that you do. I would STRONGLY suggest you get hold of Goldacre's work on pharma. The Guardian Science Weekly podcast has an interview with him where he covers a lot of this ground specifically from the point of view of people in the business.

I don't buy most of the complaints about "me too" drugs, because typically they have different effectiveness, side effects, and may work better in some people than others.

On the other hand, Prilosec/Nexium is a different story. Prilosec is a mixture of left- and right-handed enantiomers of a chiral molecule. Only the left-handed one produces medical effects in people. So when the patent protection came off of Prilosec, AstraZeneca developed a way to produce purely the left-handed molecule, and this became Nexium (there were some patent fights by generic drug makers over this, but AZ won).

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